There’s no doubt anymore. China’s stock market is in a bubble. There’s only one way forward for Alibaba’s stock, and that is down.
Shares in Alibaba.com nearly tripled today when they started trading in Hong Kong. The shares closed at HK, 39.50, after the stock was originally priced at $13.50.
Alibaba’s shares now trade at 320 times its expected net profit this year of $83 million. History has shown that no company can sustain that sort of valuation, and that sooner or later, the stock will head for a big fall. It may rise in the short-term, though, if the fever continues.
The average U.S. stock has traded at 16 times earnings from 1900 to 2005. For more on the so-called PE ratio, see here.
2 Comments
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dontreplay said:
You are right. There is bubble in China’s stock market. But you also are wrong. There is no bubble in Alibaba. You will see it in 2 years. The advertising model of Alibaba is the best one in the world, even better than that of google and facebook.
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dontreplay said:
And that is why yahoo and softbank invested so heavily in Alibaba. For yahoo, that is the secret weapon to complete with google.
2 Trackbacks
8:44 am
2007 China’s Web and Wireless Sector In Review : China Web2.0 Review said:
[...] $1.5 billion and made it the second largest tech IPO since Google. Alibaba’s share price almost tripled in its debut. The successful IPO of Alibaba and Netsun, which is listed in Shenzhen Stock Exchange since 2006, [...]
7:38 pm
Review of China’s Web and Wireless Industry in 2007 | Silk Road To Dragon China said:
[...] $1.5 billion and made it the second largest tech IPO since Google. Alibaba’s share price almost tripled in its debut. The successful IPO of Alibaba and Netsun, which is listed in Shenzhen Stock Exchange since 2006, [...]